Industry Committee on May 17th, 2016

[Chandra Arya, Liberal, Nepean, ON]

Okay. Let me put it bluntly—

[Joseph Galimberti]

—they compete globally. In the security of a home market, knowing you can play in a fair ball game is crucial.

[Chandra Arya, Liberal, Nepean, ON]

Pardon my lack of knowledge. My question is, a lot of Canadian companies are quite worried. So can they compete with the steel plants that have been set up during the last five or 10 years in other parts of the world?

[Joseph Galimberti]

From a physical facility standpoint?

[Chandra Arya, Liberal, Nepean, ON]

Yes.

[Joseph Galimberti]

Yes, absolutely.

I will go back to ArcelorMittal. It's an absolutely top-grade, best-in-the-world, automotive steel plant that supplies the automotive industry in southwestern Ontario and exports across the border. They are, no question, world-class.

[Chandra Arya, Liberal, Nepean, ON]

ArcelorMittal is a global company, and I think that for their international trade they choose a way they can produce cheaply. Am I right?

[Joseph Galimberti]

They choose where they can produce efficiently and sell in that market, yes, but all of our members are the same way. EVRAZ, that now owns IPSCO in Regina—they're pipe and tube resource folks, predominantly—is a Russian company. They can invest wherever. Gerdau is a South American company from Brazil. They can invest wherever.

[Chandra Arya, Liberal, Nepean, ON]

Finally, on the forest, I don't have any forest companies here. I'm from Ottawa. I do understand you are investing heavily in innovation. Is there anything specific you can tell me in the next 10 or 20 seconds?

[Paul Lansbergen]

We look forward to discussing with the minister his forest sector innovation strategy that was mentioned in the budget. In fact, he'll be meeting our board of directors Thursday morning.

[The Chair, Liberal, Dan Ruimy]

Excellent.

Thank you very much.

Mr. Dreeshen, you have five minutes.

[Earl Dreeshen, Conservative, Red Deer—Mountain View, AB]

Welcome to the witnesses today. It's certainly an interesting discussion we're having this afternoon.

Let me first draw your attention to the forest products industry. There's a positive outlook, as you've spoken about new bioproducts and being able to reduce greenhouse gases by building permanent products from wood.

You've also talked about management practices. That's where I want to go, to take a look at what you've been able to do in order to clean up the environment, so your concerns about air, water, and land have been taken into account.

You mentioned that in Canada we have regulations that ensure this is going to be the case. We have similar types of regulations in oil and gas, as well. We are a world leader in those areas.

I'm trying to pull together an opportunity for us to talk about how they can work together. You've indicated some of your research has allowed you to go into tailing ponds and help with the efficiencies of the reclamation or the changes that are needed there. Of course, we've seen how they have shrunk dramatically in the last number of years. We've yet to be able to get the message of what we have done out to the rest of the world. We always seem to be having some sort of conflict there.

Can you tell me how it is you're able to take the things you are doing to tie that into the oil and gas industry, and how the oil and gas industry, and the things they do, are able to work with your industry members, as well?

[Paul Lansbergen]

Maybe I can make just a quick comment about the green credentials and the importance of how governments build into that.

As you know, we operate in public forest lands owned by the provinces. They have regulations on how we manage the forest. We've commissioned studies that have looked at the regulatory regime in Canada versus competing nations. Studies have found that we have among the most stringent regulatory regimes in the world. On top of that, we have the voluntary certification. When we're trying to sell our products around the world, the Canada brand is very important. It doesn't get a premium, but in a price tie, it might win us the day. That's important.

In terms of working with other sectors, we're trying, but we're also reaching out past our comfort zone into new markets. That's very challenging in its own right. All the companies have corporate strategies they're looking at on where to go. The breadth of opportunities is almost overwhelming. With some of the other natural resource sectors, like mining, not doing great at the moment, their willingness or capacity to try new things on a big scale might be quite challenging. I mentioned the lignin study at Lakehead. Goldcorp and another mining company, which I can't remember off the top of my head, are partnering in that research. Some of the R and D is happening.

With oil and gas, obviously they are going through very tough times. Some of our researchers have talked to COSIA. We're making some efforts. Whenever you get different sectors talking to each other, it just complicates things, and things take longer. It's still early days.

[Earl Dreeshen, Conservative, Red Deer—Mountain View, AB]

One of the other programs you've been involved with is investments in the forest industry transformation program, as well as the forest products innovations program. I wonder if you could speak to the advantages you've seen through your engagement in those two programs.

[Paul Lansbergen]

Quite simply, they have resulted in some new first-in-Canada and first-in-the-world technologies being adopted by some forest companies, whether they be smaller ones or larger, putting Canada in that first-mover-advantage space. The NCC, the cellulose filaments, the Structurlam-type products, the new OSB products, the new wood siding products—those are giving us a bit of an advantage in the global marketplace. We need to keep the momentum going.

[The Chair, Liberal, Dan Ruimy]

Thank you.

Mr. Jowhari.

[Majid Jowhari, Liberal, Richmond Hill, ON]

Thank you, Mr. Chair.

Thank you to the panel. I'd like to start with aerospace today.

I'm a bit confused. My confusion comes from the fact that in your presentation, and also on your website, you indicate that the aerospace industry has dedicated about $1.7 billion into R and D, and most of that are coming from the private sector. From what I heard, or from what I kind of internalize, the focus is more on adding scale and growth to the medium-sized companies.

What specifically is that $1.7 billion in R and D being spent on, and how is it helping us position Canada's aerospace in a much broader sense rather than just the planes globally?

[Iain Christie]

Most of that money is being spent at the top end of the industry, on what I would have referred to as balance sheet innovation. That's where most of the private.... The business investment into R and D, as was noted previously, is clearly at the top end. A lot of that would have been Bombardier's research into CSeries and other new aircraft, Pratt & Whitney's research into the geared turbofan, and CAE's research into flight simulators and new novel ways of blending reality.

Not as much of it is spent by the process innovators. This is why I refer to it as the existential problem. To remain competitive, we need to drive the innovation down the product chain. We need to make sure we are encouraging our supply chain to be innovative, to adopt process innovation, and to stay globally competitive, because that's the way we'll retain the position we have in the current market.

[Majid Jowhari, Liberal, Richmond Hill, ON]

In your opinion, where does the composite work that we are doing, especially in the Montreal area, fit into R and D and aerospace?

[Iain Christie]

That's a good example because a lot of the composite work starts out as product innovation. It starts out as figuring out how to make new products from composites that you couldn't make before. But eventually it needs to become process innovation because Bell Helicopters or the large manufacturers may do a lot of that, but in the end, they don't necessarily want to be the ones manufacturing the parts, so they need people to adopt the new methodologies and technologies that have been developed down the supply chain. So, this is exactly the point. How do we take all of that R and D investment that's happened at the top end and move it down through the supply chain? Those are the guys who are going to be the ones, really, where the business growth is going to come from.

[Majid Jowhari, Liberal, Richmond Hill, ON]

That's where we should be focusing on.

[Iain Christie]

In conjunction with government, that's the problem we're trying to solve. I don't have an answer for it but I know it's the thing that I would like to find a solution to.

[Majid Jowhari, Liberal, Richmond Hill, ON]

Okay, let me jump quickly to steel. With the capacity concern that we talked about, how does international trade and...? Well, where are you focusing on the innovation, and how does it fit into our ability to play a key role in international trade?

[Joseph Galimberti]

Our trade from the industry is sort of NAFTA-focused. We tend to be very close to market. In our process innovations, continual improvement of efficiency is a crucial component. Frankly, our customers are demanding better product. The automotive industry wants lighter steel for higher efficiency vehicles. The oil and gas industry wants further exploration for more efficient well casings, that kind of thing. A lot of it is customer driven through the demand cycle. The point about the number of new steels is very fair. The chemical composition is constantly changing: lighter, higher strength, more efficient to produce, and easier to ship.

[Majid Jowhari, Liberal, Richmond Hill, ON]

I have a quick question to forestry. You talked a lot about innovation. How can we help? How can the government help to expedite the commercialization and the trade, getting back into the international trade?